5 Ways Creating an LLC Gives You Tax Advantages

5 Ways Creating an LLC Gives You Tax Advantages

Limited Liability Corporations, or LLCs, account for more than 70 percent of all business setups in the U.S. When you create an LLC, you create a business separate from yours as an owner. When starting a business, it’s best to figure out if this is your best option. 

There are several LLC tax benefits, including personal liability protection, so-called ‘pass-through taxes,’ and business expenses. 

Here are five tax advantages to forming an LLC.

1. Personal Liability Protection

One of the most enormous LLC tax benefits is the inability to be sued for your personal assets while doing business. You won’t have to worry about someone coming after your home, car, or family savings should there be a lawsuit. However, each state does have different rules when you create an LLC.

Regardless of the risk to your business, it would help if you considered an LLC to protect your assets when you form an LLC.

2. Pass-Through Taxes

When you pay your business taxes with an LLC, you pay taxes on an individual level, other than corporate taxes. Your profits and losses are ‘passed through’ and declared personal income. 

Significant tax advantages of pass-through taxes include double taxation. A corporation pays taxes, as does the shareholder. 

3. Business Expenses

Starting a business involves many expenses, including accounting services. You can deduct these as one of several LLC tax benefits. In addition, you can take several deductions on your business taxes for supplies and mileage. 

You will still have to keep good notes and keep track of the money you spend on your business. It’s also important not to mix personal and business expenses. Buy yourself a ledger and notebook, and keep receipts separate. 

Another tax break means you might be eligible for the Qualified Business Income deduction. 

4. Capital Expenditures

For a period of one year, you can deduct capital expenditures as part of your tax advantages for an LLC. Should you need large pieces of equipment or a place to house your business, you can include this as part of your tax breaks. 

It’s best to check with your accountant about large expenditures when starting a business and to take advantage of these tax advantages. 

5. Tax Options

There are several different categories under an LLC when considering tax options, including S-Corporations, sole proprietorships, and S-Corporations.

Each comes with different rules, regulations, advantages, and disadvantages. 

Five Tax Advantages to an LLC

When starting a business, you’ll find plenty of flexibility when filing as a limited liability corporation, given how the federal government will tax your income.

The five most significant tax advantages to filing an LLC are personal liability protection, pass-through taxes, and business expenses. You can also take advantage of capital expenses and tax options. Knowing what’s best for you will help you make the best decision!

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